Homework 2 How good is the Exponential Function Discounting Formula? An Experimental Study.

Homework 2 How good is the Exponential Function Discounting mandate? An Experimental Study. We studies in financial economics and behavioral finance always strive to explain various anomalies documented in the existential literature. Recently, Loewenstein and ODonoghue wide review study of time neglecting, they discontinue the displace receipts model have little empirical support. One of the anomalies, they note, is the declining-discount- values moment established in the economic mental science literature, and often referred to as hyperbolic time discounting. In a recent survey of investor psychology and asset pricing, observational studies of inter-temporal choice derive congenital discount rates by applying the exponential wreak to the sum of gold in the subjects benefit-cost responses. However, studies in psychology question the ability of subjects to approximate the exponential function correctly. One such anomaly describe in the observational literature is t he negative relationship amid the time and the sum of the exchange flow and the derived (implicit) subjective discount rates. This is anomalous because the impact of these deuce factors, time and sum, on existent capital market entertain rates is generally positive.

The excogitation for the present study therefore is threefold: (1) to estimate the stage of the EF misevaluation and its variation with a apt(p) product price aim and its expected growth rate; 2) to examine whether such early(a) mathematical functions as linear, quadratic and cubelike functions, conform to the discounting and heighten process of individual decision makers; and (3) to canvas the impact of personali zed characteristics. Finally, regression re! sults demonstrate no statistically significant correlation between the exponential function (EF) subjective misevaluation coefficient and such personal characteristics, as sex, age, having a savings report and investing in capital market securities. This result implies that the EF misevaluation is big-chested; personal differences be of no significant consequence. If you want to read a spacious essay, order it on our website: OrderEssay.net

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